Nasdaq 100 stocks above the 200 DMA neared extreme lows again last week. Also note that the Naz 100 has continued to show more deterioration versus its 200 day MA's than the "average" stock in the Naz.

While the percentage of stocks above 200 day MA's in the Naz is still very weak it has shown improvement. I think this is indicative of the fact than many small and mid-cap stocks hit their valuation lows before their bigger brethren in the Naz 100.

This may also have something to do with so many stocks trading at extreme valuation lows, especially with respect to Price/Cash per share -- or Price/Net Cash per share.

One valuation technique that worked quite well during the 2002 bear market was finding stocks that had high net cash positions and were selling around one time cash per share. In fact, many stocks just quit going lower when they reached trade at a PSR of one combined with a one-to-two times net cash. The exception was stocks with very high cash burn rates and/or large net income losses. Even then many stocks with high cash burn rates quit selling off when they got close to one times net cash.

Currently, these ratios are not holding as well and I believe this has a lot to do with the elimination of the uptick rule combined with the massive proliferation of levered ETF's and futures-related pressure on the marketplace. So currently, in many cases we have better companies with lower valuations and generating cash and/or net income trading at valuations similar to when companies were trading with large cash burn rates.

However, if the trend in the above charts hold, then it looks like the smaller and mid-cap names in the Naz are holding better than their larger cap peers. Market sell-offs seldom end all at once. But usually you need the large cap names to have a few sessions where they proceed to scare the heck out of the masses, or at a minimum get to valuation levels that get people feeling like even though they know they are cheap, these "leaders" won't quit going down until we see single digit P/E's. That is what the late action last week felt like.

As an example, here are some forward P/E's that are worth noting as of Friday's close. As you can see they are exceedingly low, and most of them still have forecast earnings growth. Even if earnings don't grow and in fact get cut by 33% (some may feel this is extreme assumption, others may not), these P/E's would rise by 50% and on normalized EPS growth still be quite low.
 

• Microsoft (MSFT): 13.2
• Intel (INTC): 12.4 
• Cisco (CSCO): 13.9
• STMicroelectronics (STM): 11.2 
• Texas Instruments (TXN): 13.0 
• Verizon (VZ): 12.3 
• AT&T (T): 9.9 
• 3M (MMM): 13.3 
• Applied Materials (AMAT): 14.7

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